On January 29, the Congressional Research Service (CRS) released a report on the challenges banks may face in providing services to certain individuals and businesses. The CRS’s report was based on the perception that an individual or business poses a risk to the bank’s ability to comply with relevant practice requirements and restrictions imposed by certain regulatory requirements. As an example, the report explained that banks often engage in de-risking or de-banking, where they terminate accounts of businesses, such as some money transmitters, that could jeopardize compliance obligations imposed by the BSA/AML framework.
The report also noted areas where banks may avoid relationships due to perceived legal risks, even if these businesses operate legally under state law, such as cannabis businesses. Although cannabis is legal in several states, it remains illegal federally, creating a conflict for banks that are federally insured and regulated, which may potentially lead banks to avoid providing services to such businesses.
Additionally, the report cited examples where a bank terminates certain services to businesses, such as gun companies, to avoid the potentially high reputational risk. In this regard, the report touched on the ideological discrimination debate, citing past instances like Operation Choke Point, where regulators in 2013 were accused of targeting certain “high risk” industries. The report cited concerns expressed by some Congressional members that similar pressures have been applied to the cryptocurrency industry, drawing parallels to the aforementioned Operation.
